Enhancing and Expanding Containerized Commodity Movements. Libby Ogard Prime Focus LLC June 13, 2013

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1 Enhancing and Expanding Containerized Commodity Movements Libby Ogard Prime Focus LLC June 13, 2013

2 An Empty Box is a Terrible Thing to Waste! 20% of all ocean containers are repositioned empty Stakeholders spend more than $7 Billion 8.5 million move between China and the U.S. Over 500,000 empty movements annually 500 Trade Routes

3 Containers Mean Faster and Fresher Shipments to Consumers Transloading at rail terminal allows heavy haul Asia has less developed storage network Containers can be loaded in minutes

4 Transpacific Import Volumes

5 Northeastern Illinois is the World s 7 th* Largest Port

6 Soybeans Compete for Containers

7 Rail market share of containerized imports Canada West Coast ~ 77% 1.5 mm Import TEU s; 1.1 mm Intermodal TEU s Vancouver ~ 55% IPI & 18% transload Prince Rupert ~ 99% IPI Canada East Coast ~ 48% 712k Import TEU s; 340k Intermodal TEU s Montreal ~ 40% Halifax ~ 80% U.S. West Coast ~ 67% 9.1 mm Import TEU s; 6.1 mm Intermodal TEU s LA/LB% ~ 37% IPI & 30% transload Oakland ~ 30% IPI & 20% transload PNW ~ 50% IPI & 24% transload Mexico West Coast ~ 33% 1.2 mm Import TEU s; 395k Intermodal TEU s Manzanillo ~ 20% IPI Lazaro Cardenas ~ 57% IPI U.S. East Coast ~ 17% 5.1 mm Import TEU s; 885k Intermodal TEU s NYC ~ 13% Norfolk ~ 30% Charleston / Savannah ~ 18% Gulf ports minimal Percentage moving inland by rail is TTX s current estimate TEU volume numbers use 2011 full year data

8 Empty Equipment Flows East West Trade Lanes

9 How Do Vessel Operators View Containerized Commodity Movements? The Positive Plentiful volumes to choose from in surplus container markets. Heavy can be an advantage depending on lane. The Negative Low rates needed for export moves not much higher than empty repositioning Extended overseas demurrage (free time) Heavy may reduce rail and vessel utilization may require highway permits Lots of speculative pricing leads volitile rate/volume commitments.

10 From An Ocean Carrier Perspective: What Can lead to Increased Container Use? Show up! If you make a booking tender the load. If you book 100 containers show up with 100, not 90. Improve equipment cycle time At origins load and release containers quickly. At destination assure customer unloads freight within a reasonable time. Contracts and Higher Rates

11 How Do We Improve Visibility? Bring railroad closer? Micro Terminals Paper Ramps Drop lots/public Empty Depots Reduce Contractual Barriers Empty equipment posting? Web integrated tools Improve communication? Shipper Coops Trade Associations like Voluntary Interindustry Commerce Solutions Association VICS

12 Soybean Backhauls Create Transportation Advantages for Partners Advantages Density is a transportation advantage for carriers Long haul transportation makes economics attractive Trans loaders in NE Illinois are located near rail terminal reducing carrier asset cycle time Importers often lack warehouse capabilities or dock facilities for bulk carriers International and Domestic Consumption Possible Domestic opportunity for SE Feed and Oil Fastest and Freshest Containerized Beans Containerized beans move faster than barge or bulk Speed improves freshness

13 Risks Ahead Competition for Containers Beans compete with Scrap Paper for equipment Beans and Scrap complete vs. higher paying freight Equipment Visibility tools exist but not widely implemented Transloading Increased activity In coastal areas reduces container supply inland Export tranloading driven by need to balance equipment Time Sensitive Cycle times reduce tolerance for long drays to pick up freight Increased competition in transloading has reduced public advocacy Container Weight Reduces train sizes and hitch utilization Truck size and weight Labor issues Rate Stability The price of beans changes monthly resulting in producers expecting transport prices to flex with the same time horizons. Most rail and ocean carriers want stable contracts where rates remain stable for a year. Truckers have the most volatile pricing structure because fuel is their number one cost item.

14 Questions? Libby Ogard Prime Focus LLC